Provide a Simple Example of a Protective Put Strategy for Bitcoin ▴ Learn

Provide a Simple Example of a Protective Put Strategy for Bitcoin.

A protective put involves an investor who already owns Bitcoin (long position) buying a put option on Bitcoin. If the investor owns 1 BTC and buys a put with a strike price of $50,000, they lock in a minimum sale price of $50,000.

If BTC falls to $40,000, the loss on the BTC is offset by the profit on the put option, minus the premium paid. This strategy establishes a price floor.

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